Higher targets for credit derivatives pros

Leading credit derivatives banks are making it harder for their traders and salespeople to pocket big bonuses.

Falling margins for complex derivative products are encouraging banks to get a handle on compensation costs say derivatives recruiters. "The profit threshold people have to reach before their earnings feed into bonuses is rising," says one. "This is despite margin compression, which makes it harder to earn profits in the first place."

Thresholds are said to be increasing most at leading credit derivatives players like JPMorgan, and Deutsche Bank.

"The bigger banks are placing increased value on their franchise and expect their people to bring in a lot more money than they used to," says one consultant. He adds: "As the cost of people has increased over the past few years, banks have been forced to distinguish between outperformers and the rest."

Citigroup illustrates the dangers of not paying enough, however. Recruiters say the U.S. bank suffered an exodus of credit derivatives staff after paying paltry bonuses last year, and is now having to replace them at inflated rates.